Barco Projections

Q1. What are the key differences between Sony's and Bacro's strategies as far as their product roll out is concerned prior to Aug 1989 in the projector market (that is, you need to compare and contrast the chronological order and the scan rate/prices/other features of the models that both players introduced in the market prior to Aug 1989)? Why is it that both players were playing such different strategies prior to Aug 1989?

Barco started producing projection systems in 1981 and Sony entered industrial projection in 1985. From Barco's point of view, the industrial projection market was divided into three segments based on scan rate - video (scan rate 16 kHz), data (scan rate upto 45 kHz) and graphics (scan rate over 64 kHz). Before August 1989, Sony was only into data and video projectors. Sony's projectors were inferior to Barco's and were, on average, 15% lower in price. They were expected to produce better data projectors by late 1989 and the first ever graphics projector in late 1990. This is how they both rolled out products in each segment.

Video projector

Barco entered the market in 1981 with its first launch - a video projector, BV1 with scan rate 16 kHz and price 450K Bfr. In 1984, for broader compatibility they upgraded to BV2 with scan rate 16-18 kHz and price 395K Bfr. Sony entered the market in 1985 with a video projector, 1020, which was slower than Barco's video projectors at that time but had a better quality tube. In 1988, Barco produced a new video projector, BV600 with scan rate 16 kHz and price 350K Bfr.

Data projector

By 1983 end, Barco introduced first computer-compatible projector - a data projector, BD1 with scan rate 18 kHz and price 540K Bfr. In 1984, for broader compatibility they upgraded to BD2 with scan rate 16-32 kHz and price 590K Bfr. In 1985, they produced the most powerful data projector of the time, BD3 with scan rate 16-32 kHz and price 680K Bfr. To follow the changing computer technology, they extended the application of BD3 to handle graphics by upgrading BD3 to BDHR with scan rate 16-45 kHz and price 695K Bfr. In 1987 and 1988, they produced BD400 and BD600 with same scan rate 16-45 kHz and price 580K Bfr and 480K Bfr respectively. By 1989, BD600 became Barco's principal product in this segment. Sony had 1031 with scan rate 35 kHz only, which in 1989 was the most powerful data projector they had.

Graphics projector

In June 1987, to address the buyers' frustration due to limited scan rate of data projectors, Barco launched for the first time a graphics projector, BG400 with scan rate 16-72 kHz and price 1,000K Bfr. It was the industry's most sophisticated projector. The price of BG400 came down to 960K Bfr by 1989.

There was a difference in strategies played by the two companies because of the two reasons:

1) First, they had different goals. Barco's goal was to become a leader of industrial projection market and to be among the top three manufacturers. To achieve this goal, they produced projectors with high quality and constantly evolved in all segments to roll out upgraded products based on consumers' needs and growing technology. On the other hand, Sony was a high turnover consumer electronics manufacturing company and their goal was to be 50% an industrial supplier and 50% a consumer supplier. Due to their lower prices and comparable quality in video and data (about 35 kHz) segments, they held higher market share than Barco did. They were able to keep their prices low because of three reasons - (1) their products were of inferior quality than Barco's, (2) they used tubes that were manufactured in-house, and (3) they used Barco's R&D knowledge and kept their manufacturing costs low.

2) Second, they had mutual relationship due to high interdependence. Barco did not care about the older products once it moved on to produce advanced products because Sony, as a second mover (lagging behind in time), was directly competing with their low quality products, and Barco was dependent on Sony for low-cost high-quality tubes. On the other hand, Sony was dependent on Barco's R&D knowledge so they did not threaten Barco to pose high competition in high quality segments (data and graphics).

Q2. Consider a hypothetical case where Sony was to charge $9,000 for its new 1270 'super data' projector (assuming that 1270's marginal cost is much lesser than $9000). Do you think that Sony can merge the data and the video segments (in other words, it will attract a good chunk of customers, typically >30-40% of the share, in each of the two segments) if it was to charge the $9,000 price for 1270? Give reasons for your answer. Next, consider the hypothetical case where Sony was to charge $15,000 for the 1270 projector. Do you think Sony would be able to merge the data and the graphics segments if it was to charge the $15,000 price for 1270? Give reasons for your answer.

For segment merging the clarity on following issues are important.

1. 'Price signalling quality' issue - During 1989, the disadvantage with Sony was that they didn't have a sound established reputation of being tech savvy firm in the market and